Frontier and Spirit to merge, creating fifth-largest airline in U.S.

Frontier Airlines and Spirit Airlines, the two largest discount carriers in the U.S., have agreed to merge in a deal valued at $6.6 billion, creating what would become the fifth-largest airline in the country.

The merger gives Denver-based Frontier Airlines a 51.5% controlling stake in the combined airline. Spirit investors will receive 1.9126 shares of Frontier plus $2.13 in cash for each share they own, giving Spirit shareholders an implied value of $25.83 per share, which is a 19% premium over the value of Spirit shares at the end of last week, the companies said.

“The transaction is centered around creating an aggressive low-fare competitor that will better serve guests, expand career opportunities for our team members and create value for our shareholders,” Ted Christie, CEO of Miramar, Fla.-based Spirit, told analysts on a call discussing the deal on Monday. “We believe we are a perfect fit with Frontier. Our businesses share similar values, including our long-standing commitment to affordable travel.”

Spirit’s shares soared more than 17% after the deal was announced, closing at $25.46, while Frontier’s ended the day $12.82 up 3.5%.

Frontier Chairman Bill Franke, a longtime discount airline investor and executive, will chair the combined company, which he said “will create America’s most competitive ultra-low fare airline for the benefit of consumers.”

The companies didn’t announce the new name of the combined carrier, the CEO or location of the airline’s headquarters. Those questions will be answered by a committee led by Franke after the transaction closes, which is expected in the second half of the year, pending regulatory and shareholder approval. Labor unions were informed early Monday, the airlines said. Pilots at Frontier and Spirit are represented by the same union, as are the two airlines’ flight attendants.

The deal comes as carriers are still struggling to recover from the pandemic. Fast-growing discount airlines such as Spirit and Frontier that focus on price-sensitive leisure travelers have been able to weather the crisis better than their larger-carrier competitors, which are more reliant for revenue on international and business travel, two segments that have lagged in the recovery.

That has meant U.S. airlines large and small have been going after domestic leisure travelers, redrawing their networks in the process, to help dig themselves out of pandemic losses.

For Franke, the deal is the latest in a career of making investments in and overseeing low-fare airlines around the world, including Spirit. His empire of ultralow-cost airlines includes Hungary’s Wizz Air, Chilean carrier Jetsmart and Volaris in Mexico.

From 2006 through 2013, Indigo Partners held a stake in Spirit, with Franke serving as chair of the airline before he resigned when Indigo sold its position in the carrier. Shortly after that move, Indigo bought Frontier Airlines from Republic Airways for $145 million.